Dispelling the myths about ‘laying off’ employees

Bernard Matthews has announced that it is laying off 130 workers in the aftermath of the bird flu crisis. Further lay-offs of up to 500 employees may be necessary as sales have slumped in the wake of bad publicity.

The media coverage of this development has highlighted some fundamental misconceptions about laying off employees.

Contrary to general belief, lay off is not the same as redundancy, although lay-offs and redundancies often come about in similar situations. Lay-off occurs where the employer asks employees to stay at home because there is not enough work. A variation of lay-off is short-time, which involves cutting workers’ hours.

The key differences between lay-off and redundancy are that lay-off is temporary and does not involve dismissal. Lay-offs are rare in the UK and generally only occur in the manufacturing sector.

An employer can only legally lay off employees if there is an express contractual right to do so, or (more commonly) if the right is agreed in a collective bargaining agreement and incorporated in contracts of employment.

In the absence of a contractual right, or express agreement, lay-off will be in breach of contract and the employee will be entitled to resign and claim constructive dismissal. The dismissal is likely to be unfair and the employee may be entitled to compensation for unfair dismissal and a redundancy payment.

The employer may also be liable for a protective award of up to 90 days’ pay for failure to collectively consult with the employees. The protective award may be avoided in exceptional circumstances, but the tribunals have generally been unsympathetic to employers in difficult financial situations.

If the contract of employment makes provision for lay-off or short-term working it may also specify whether the laid-off employee will be paid and, if so, how much.

Employees with more than one month’s service who are laid off without pay may be entitled to receive a guarantee payment from their employer, calculated by multiplying the normal daily working hours by the employee’s average hourly rate to produce a daily rate, subject to an upper limit of £19.10.

Guarantee payments are payable for a maximum of five days in any rolling three-month period, and a laid-off employee may lose the right to a guarantee payment if they refuse to undertake suitable alternative employment during the lay-off, or do not comply with reasonable requirements imposed by the employer to ensure that they remain available for work.

The Bernard Matthews employees have reportedly been laid off for 20 days. The length of lay-off depends on the contract, but an employee who is laid off for a long period may become eligible for a redundancy payment.

If lay-off lasts for four or more consecutive weeks (or six weeks in a 13-week period), the employee can serve notice on the employer indicating their intention to claim a redundancy payment. If the employee then terminates the contract by giving notice, they will be entitled to a redundancy payment (if they have more than two years’ service) unless the employer gives a counter-notice and there is a reasonable expectation that within four weeks the employee will resume normal working.